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Saturday, March 24, 2012

Iran issue looms over US economy, says Forbes

THE United States will go to war with Iran, elect a new president and move on to a new gold standard in the next five years. Bold predictions indeed.

By Robin Chan

They came from American media mogul Steve Forbes at the InterContinental Hotel here yesterday.

'This is the worst recovery from an economic downturn since the 1930s, but it is moving in a better direction than a year ago,' Mr Forbes said in the lecture organised by the American Chamber of Commerce.

BACKGROUND STORY

GOOD AS GOLD

'In the next five years, something is going to happen that will seem astounding today. The US dollar is going to be relinked to gold. You are going to see a new gold standard. Nothing else works as well as a new gold standard in facilitating commerce.'

American media mogul Steve Forbes

'There is still plenty of liquidity out there, new jobs are being created, inventories are being rebuilt, people are starting to buy more, but the one cloud that hangs all over this is Iran-Israel.'

Tensions are building over Iran's nuclear weapons programme, with the US raising sanctions against the regime.

'It could be in May, June, or after the US presidential election, but I think something will happen. I hope they can resolve it peacefully but I don't think that is possible now,' Mr Forbes said.

But he added that the world will overcome any fallout 'fairly quickly'.

'I don't think a huge spike in oil prices will last a very long time, not any longer than it did in the first Gulf War.'

Mr Forbes, chairman and editor-in-chief of Forbes Media, also tipped that the US will peg its currency to gold within the next five years.

The move - a call he has made since last year - will stabilise the dollar, allow interest rates to rise again and the world economy to grow 'vibrantly'.

It is needed because the weak US dollar and money-printing by the Federal Reserve have actually hurt the economy and distorted the real prices of commodities, leading to a misuse of capital.

Monetary policy in the US has been one of the chief headwinds to the economic recovery, he said.

'In a global economy, you need stable money... When the dollar gets into trouble, the global economy is disrupted,' he said.

'So in the next five years, something is going to happen that will seem astounding today. The US dollar is going to be relinked to gold. You are going to see a new gold standard. Nothing else works as well as a new gold standard in facilitating commerce,' he said.

'And having stable money again will make life, globally, much easier.'

Once the dollar stabilises, there will be an 'exponential growth in trade'.

And under this new monetary system, the US Federal Reserve will 'back off from trying to tightly control interest rates' and will not try to guide the economy, but simply to stabilise the currency, he added.

Mr Forbes, who campaigned for the Republican presidential nomination in 1996 and 2000, also tipped Republican Governor Mitt Romney to be the next president, although he did not have favourable words for him.

'He has no real principles. That is one of the reasons why you have had five real front runners in this Republican nomination race,' he said.

'There is a feeling that Mr Romney was the least desirable candidate, except for the ones who actually ran against him... So he does not appeal to the Republican base. That is something he has to work on.'

But he gave the race to Mr Romney because he said voters do not like President Barack Obama's policies, the economy has not recovered as quickly as it should have, and the unions are split within the Democratic Party.

'There is a current disenchantment with President Obama that is not fully reflected in the polls,' he said.

Asked by an audience member whether he would consider being treasury secretary should Mr Romney win, Mr Forbes said to laughter: 'Given the fact that you can tell my enthusiasm for Mr Romney is not unbounded, I don't think I'm at the top of his list for a post-election phone call.'